What to Expect in Davos: Global Risk Landscape

Submitted by Kevin Lu On Wed, 01/26/2011

One of the four themes in Davos this year is risk management. The World Economic Forum[1] (WEF) issued a report titled Global Risks 2011[2] earlier this month. It provides a high-level overview of 37 selected global risks as seen by members of the WEF’s Global Agenda Councils and supported by a survey of 580 top leaders and decision-makers around the world.

Issues related to macroeconomic imbalances top the list. These are a group of economic risks including currency volatility, fiscal crises and asset price collapse, which arise from the tension between the increasing wealth and influence of emerging economies and high levels of debt in advanced economies.

In addition, a number of risks are related to geopolitics. They include: corruption, geopolitical conflicts, global governance failures, illicit trade, organized crime, space security, terrorism, and weapons of mass destruction.

Fragile states, the report notes, are particularly exposed to some of these political risks. Because these countries are less resilient, for example, even when flows of illicit goods and criminal activity are small relative to global markets, they can have an outsized effect as the real value of such activity can dwarf national salaries and government budgets.

WEF has been focusing on global risk issues for the past few years. It has built a Risk Response Network[3], a unique platform for global decision-makers to better understand, manage and respond to complex and interdependent risks. The WEF’s Risk Response Network work benefits from the top- level contacts it maintains and is expected to collect risk-related information that is highly credible and hopefully predicative.

However, last year the WEF’s Global Risk Report[4] notably missed any sign of the Euro zone debt crisis that occurred in 2010. So the jury is still out whether such risk work can have real predictability.